Sellers !!! Ignore what your listing agent tells you about FHA loans !!!

By
Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

 

angry and upset

FHA mortgages, such a very very bad thing.  Don't do it... Don't allow your buyers to utilize this program. Don't allow your seller to accept offers with FHA mortgages. They are very very bad....

 

HOLD THE PRESS !!!!..  Wait one second.  In the real estate and mortgage industry, don't we get angry when someone offers their professional opinion on a topic or question that they don't know much about.  That their advice could be an assumption, or from prior years, or from a bad experience?

 

PS. my initial comments above was a joke. FHA loans aren't a bad thing at all and I am angered by those that say otherwise. In many cases, FHA loans are much better than conventional loans. Please read: FHA loans vs Conventional loans

 

 

 

 

Sellers, fire your listing agent if they tell you not to take an FHA offer !!!!   They could be costing you lots of money. Unless you just don't care about throwing money out the window, this is extremely poor advice. PS... fire an agent if they tell you not to accept any type of offer that is part of any type of financing that you might not agree with.  ie.: VA loans, FHA loans, USDA loans, conventional loans, etc, etc.

 

 

 

 

FHA loans

 

So what sparked this blog?  The reasons are these two comments from a recent blog comparing FHA loans and Conventional loans.  Amd keep in mind, these 2 comments are coming from realtors defending FHA mortgages.

  1. Chris Olsen wrote this comment : Comment by Chris -  He states that a seller accepted a conventional offer that was $10,000 less than his clients FHA offer.
  2. Karen Crowson wrote this comment : Comment by Karen - She states the bias opinions from other realtors.

 

 

Here are the false assumptions about FHA loans :

  • Only for first time homebuyers
  • for those borrowers with poor or bad credit
  • for those with no money
  • FHA loans take a longer time to process or close - FALSE

  • they are more expensive, have higher fees and or rates.  Again, False. Every mortgage lender has a profit margin, regardless of the type of mortgage. If someone is charging you more on a FHA loan, it's purely out of greed. Here is a good example. FHA fees and why I was charged more. Please read the 2nd paragraph.
  • appraisers are more difficult on the appraisals.  This comment is so 2002 and prior. Yes, this was sometimes an issue back in the '90s.  But HUD changed the appraisel requirements about 7 years ago. If the appraiser is very picky, that's not because of FHA. (I would love for some appraisers to chime in here and I will post your answers.)

  • a lender that is asking for more information that you expected, because it's an FHA loan. Or who wants another appraisal, etc, etc.  These are not always because of HUD or FHA, but because of specific investor overlays. Just keep this in mind.

 

 

 

 

Conclusion :  Pick your realtors and loan officers wisely and very carefully.  We all should have your best interest at hand, as a buyer or a seller, but this is not always the case. Is this negative?  Yes, but it's the truth and it's reality. Just do your research carefully and keep the emotions out of your decision. Sure, easier said than done.

Overall, these negative comments from realtors about FHA loans usually come from old time realtors that haven't left the 90's, from those new realtors that don't know any better, or just from someone that heard a comment by another agent. You know, that trickle down effect. If someone gives their opinion as a fact, sometimes that other person listening will do the same. Just beware...

 

PS...  I don't make any extra money by promoting FHA loans. My job is to make sure that the borrower gets the best type of mortgage out there that suits their needs and goals.

 

 

 

RECOMMENDATION ??   Maybe have all sellers receive a booklet from the NAR or the local real estate associations / boards, describing the different types of mortgages out there.  And that each seller has to sign the booklet, stating that they did at least receive it.  I would bet this would be very educational, at least in my opinion.

 

 

 

Please read : FHA loans aren't a bad things and the reasons why.

 

 

 

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Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Jim Hale 07/12/2009 02:34 AM
  2. John Cannata 07/12/2009 05:35 PM
  3. Dana Devine 08/14/2009 08:00 AM
Topic:
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Ambassador
424,033
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTORĀ® - Oklahoma Investment Properties

The agents I here complaining about FHA haven't taken a continuing ed class about it in years. Far as I am concerned it is now an FHA world.

Jul 12, 2009 03:30 PM #55
Rainmaker
70,403
John Jones
Texas Urban Living Real Estate - Dallas, TX

Jeff,

Good point about the loan limits AND the LLPA's.  Went back and read that blog and that was explained very well.  I didn't mean to get off track, but my point about loan limits increasing and prices falling here was to simply illustrate the fact that many areas (if not perhaps the MAJORITY) of D/FW is now a PRIME FHA market whereas it wasn't prior to the loan limit increases and falling prices.  Picture loan limit increase from 200K to 271K with a median SP of around 220K and you get an idea.  But you're definitely right to point out that the LLPA factor makes even 20% down conventional loans a less attractive option than FHA.  I hadn't considered that as much of a factor with regards to this specific issue as much as i should have, so thanks for the insight.

One more thing...here's a link to that mortgagee letter that eliminated many of the old repair conditions.  Thought it might be helpful to some folks...

http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/05-48ml.pdf

There may have been some other updates that i'm not thinking of right now, but this is the big one. 

 

Jul 12, 2009 03:33 PM #56
Rainmaker
1,262,775
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

With the new loan limits and falling prices FHA is the best loan available and I recommend it highly.

Jul 12, 2009 04:42 PM #57
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

LENN.... . bingo, the net proceeds.  The end result. I am glad someone came out and gave an answer to what I thought most of us strive for.  Sure, there are always those chances that the deal could fall apart, but you shouldn't pit one type of loan against another.  Gee, I closed a deal for a realtor in Florida, whose client was with another lender for a conventional mortgage. And imagine that, not even did they miss the settlement date and 2 extensions, but they denied it and it was a conventional loan. Well, I had it approved in week.... and yes, I did it as a conventional loan. My whole point, the emphasis should not be on the type of loan... but what is the best deal that you could get for your client, in the monetary sense. thanks and I look forward to your follow up blog on this subject.

GITA,...... .  I agree that the seller should be educated. In some of the examples that I included in my blog, the agents just told the sellers what to do, killing some better offers, just because they were offers with FHA financing.  This part angers me and I feel that the listing agent didn't do their job properly. And thanks, I think some sort of booklet for sellers would be good, just as buyers are suppose to receive.  thanks

FERNANDO..... . even though they just recently have come back, this has been the same since I have been in the business since 1992. It should not matter the amount down or the type of financing. I just recently saw another lender deny a guy putting 20% down and I still got it approved.  Yes, loan officers need to know what they are doing, but you can't be looking over your shoulder on every offer.  As Lenn stated, the agent should care about the net proceeds .. and I agree.  thanks

KRIS..... .  I truly agree that they will be sorry.  But from what I have heard and seen, many sellers make these decisions on what kinds of offers to accept because of their agent. I blame the agents here... it's black and white... and sad in my opinion.  Thanks for the stats and the feedback.  I hope more sellers read this.

 

Jul 12, 2009 08:14 PM #58
Ambassador
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Margaret Rome, Baltimore Maryland
HomeRome Realty - Baltimore, MD
Sell Your Home With Margaret Rome

Jeff, You have got to be one of the hardest working people I know. Only one time have I seen you give up on an FHA loan (after running it by 17 other lenders). We found out it could not be done, not because of the buyer but because of the property. Hopefully that will be going to closing with owner financing very soon.

 

Jul 12, 2009 09:32 PM #59
Rainmaker
399,026
Eric Bouler
Gardner Realtors, Licensed in La. - New Orleans, LA
Listening to your Needs

Jeff, It is generally not an issue in New Orleans. People want to get things sold and many times they have little choice.  Agents used to badmouth FHA but that has disappeared over time. If you read your blog you you ill learn that the FHA loan is a great tool.

Jul 12, 2009 09:55 PM #60
Rainmaker
197,606
Tim Storm
The Emery Team of W.J. Bradley Mortgage Capital LLC - Irvine, CA
Orange County FHA and VA Home Loan Specialist

Great post. I am working with more the 40 FHA preapproved buyers right now. I hear a few times a week from one of them that a listing agent doesn't want to accept an FHA offer for one reason or another. And so the process of educating another agent begins.

Jul 12, 2009 10:35 PM #61
Rainmaker
342,008
Dawn Maloney
RE/MAX Haven - Northeast Ohio Real Estate Specialist - Hudson, OH
330-990-4236 Hudson Stow Cuyahoga Falls Silver Lak

No FHA=Not much work here in Northeastern Ohio. Thanks for clearing this up - so many people go off the deep end with very little correct info!!

Jul 12, 2009 11:29 PM #62
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

MISSY.... . It's good that realtors haven't done this in your area.  I remember those 80/20's...  some were good, others were bad.  But the borrower sometimes didn't care or know, just so they didn't have to put money down. As far as our closing times.  I can still close loans 30 days or less. I just closed one last month in 9 business days. Sure, it was a rush, because I took the loan from another lender.  But it can be done if needed. Sure, things come up and or happen. But what kills me is that most loan officers know of the problems earlier, not the day before settlement. But again, it just depends on the issues and when they were found.  Just my experience on this issue.

SALLY & DAVID.... . that's good news that realtors haven't done this in your area. Or that you don't know. If I was a realtor doing this, why would I even tell anyone this. Couldn't you report them to the board then for discrimination?  hhhhmmmm...  food for thought.  But I agree, ignoring any kind of buyer could hurt the seller. But unfortunately, many will listen to their realtor.

 

SARA.... . sure, lower home prices allows the buyer to fit under the FHA loan limits, depending on the area.  But I will have to disagree about your next statement though.  You said.. "Conventional is more likely to have a low appraisal than FHA."

An appraisal of value is just that, of value, whether it's a conventional appraisal or a FHA appraisal. This shouldn't make a difference and I am just curious on how you came up with that.  Again, just curious.  Overall, listing agents should know what kind of advice they are giving and why, and not just because they heard it from someone else.  thanks

 

Jul 13, 2009 09:36 AM #63
Rainmaker
326,319
Tom Burris
NMLS# 335055 - Dallas, TX
Texas Mortgage Dallas Mortgage FHA

FHA loans take longer? Not anymore

FHA loans don't always close? Neither do conv

FHA loans require the seller to pay a bunch of fees? Uh, maybe 1 fee under $100.... pfffttt

 

For those that don't 'get it' about what Jeff is talking about..... You need to read more of his blogs. THIS IS HAPPENING STILL!!!!

I wish real estate agents had to do more training an maintaining of licensing..... this would weed out a lot of part-timers who propogate this.

 

 

Jul 13, 2009 10:05 AM #64
Rainmaker
175,248
Rebecca Levinson, Real Estate Marketing and Online Advertising Consultant
Real Skillz-Clear Marketing for Your Real Estate Vision - Lake Geneva, WI

Jeff,

My sister, a first time home buyer, will be closing on an FHA loan this month and is thankful that she is going FHA.  The first lender, a Credit Union, that she spoke with would not have had her going FHA.  Sure, there were some repairs on the inspection that needed to be taken care of, but as she said, these were repairs that truly needed to be done anyway and both she and the seller have agreed on splitting the times.

Imagine, two parties working together to get things done:) 

Without my sister's FHA loan, this seller, btw, would have gone into foreclosure.  It's a short sale.

Jul 13, 2009 11:28 AM #65
Ambassador
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Margaret Rome, Baltimore Maryland
HomeRome Realty - Baltimore, MD
Sell Your Home With Margaret Rome

Jeff, Not only listing agents..buyer's agents need to understand how to write an FHA offer. Just got one asking for 3 1/2 % in FHA repair limits..on top of the $10,000 seller contribution. When questioned if he meant $300 in repairs, he assured me that the concern was the asbestos siding on the OUTSIDE of the house.

 

Jul 13, 2009 12:48 PM #66
Anonymous
Anonymous
Anonymous

Jeff: We run into the same thing. Occasionally the listing agent does not want to submit the offer because it is FHA financing.  FHA financing does not prevent closings. The new appraisal requirements, as you know, apply to conventional loans not FHA for the time being. The recent situation I ran into becomes a challenge for the buyer because now instead of him determining his loan choice the listing agent selling the short sale is determining how much down payment the buyer needs by not allowing an FHA offer based on some weird appraisal fear. The only thing constant in the real estate business is change. FHA has changed also. It is not the FHA some agents remember.

Jul 13, 2009 02:07 PM #67
Rainmaker
163,976
Kate Ford
Get-Your-Best-Mortgage-Rate.com - San Diego, CA
Ask Kate a mortgage question...

FHA has always been a favorite of mine. I love it because since 1932, FHA has helped so many American homeowners.  Kate

Jul 13, 2009 07:10 PM #68
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

NEAL.... .  I am trying to understand your first sentence.  But onto your question, "should they ignore the information if it's accurate."  No, not at all.  Why would I recommend that?  But why would a realtor tell a seller to not allow for a specific financing anyhow, no matter what they told the seller.  Let's ask this question then...."What could be an accurate statement?"  to make a seller not accept any deal?  The only, and I mean only thing that I could think of would be the condition of the property.  But it would have to be less than average. Seriously, what else would give a listing agent the reason to tell their seller not to accept an offer?  The only thing that I could think of is for the reasons that I mentioned before. And all of those reasons are either assumptions, past experiences, or a combination of misleading info. Sure, this is just my opinion, but I have been doing mortgages for over 16 years. I know if I tell someone that if they are pre-qualified, that they will get the house unless....  they lied to me about their info or something... if something comes up on title.... the appraisal comes in lower or with issues.... or they lose their job. Other than that, I am a stickler when it comes to asking the right questions upfront and I only lost one deal in 16 years that didn't fit the statements that I made above... and I am damn proud of that.  Any company that I have ever worked for, if I was unsure of a deal prior to taking the application, I would run it by the underwriter. The one I lost was my 3rd year in the business and I didn't ask a specific question about their current house that they owned, that it was currently a FHA mortgage and that they were renting it out and buying another home as FHA. 

 

You did make this statement..... "accept when I saw the buyer yelling at their LO because their rate was changed at the table...but that can happen on any loan."

That last sentence, that it can happen on any loan, is so very true. And that is in regards to anything, not just rate or because it was a FHA loan.

You did say that you never saw many FHA loans because of your area. I don't want to assume, but no matter what area someone is in, I have personally seen and have heard loan officers put their borrower into a subprime loan or a conventional loan because it was easier for the loan officer or quicker. And that even goes for many of those 100% financing loans that you saw. I actually talked borrowers into the FHA loan and not the 100% loan, if they had the 3% at the time.  And then just get seller help to pay for the difference of what they had to put down.  Why, it was better money management in the long run, even for a 5 year plan. Their rate would be lower....

 

In any case, I truly thank you for your participation in this, your feedback, and for your input. I hope you can clarify your first sentence for me, unless I am reading it wrong.  thanks

 

Jul 13, 2009 10:10 PM #69
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Mike Jones
SUNSTREET MORTGAGE, LLC (BK-0907366, NMLS 145171) - Tucson, AZ
Mike Jones NMLS 223495

Ambassador Jeff,

There's been some sort of mix up.  This was delivered to Tucson International Airport this evening.  :)

Mike in Tucson

Jul 13, 2009 11:56 PM #70
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

ELIZABETH.... . I wouldn't call anything in the mortgage business simple.  Even when something might seem to be easy, it sometimes becomes my hardest challenge.  Just food for thought.

In regards to those that wear both hats, that of a realtor and a loan officer. I will agree 110% and I know about 20 other loan officers just on AR, all the I respect, would say the same thing. And some of the horror stories that I have heard, came from those clients that had someone that was both their realtor and loan officer. I wrote two different comparison blogs last year, comparing both FHA loans and conventional loans. I received about 5 very negative comments, people telling me that my rate comparisons were WAY OFF... that I was wrong, misleading, expensive, etc, etc.  What was funny was that I shared these comments and my blog with a group of 15 other loan officers across the U.S. Each one laughed and some said that it was sad, that these individuals apparently don't know how to read a rate sheet, that my pricing and comparisons were right on the money. I replied to each and everyone, questioning them and asking them to show me, yes, show me their pricing and how they came up with these rates. And that they had to be missing the large penalty for low credit scores on the conventional loans. Only one wrote back to me in an e-mail, telling me that he was wrong in his comment.  But this was the same guy that argued with me in 3 comments, and even telling me that he found another loan officer to validate his comments and to justify the rate. Which led me to another blog that I wrote, two wrongs don't make a right. It's really sad and I truly believe that one person can't wear a realtor hat and a loan officer hat at the same time. I know I know my shit when it comes to lending... and I know I could do a good job as a realtor...  but it wouldn't be as good of a job as I can as a loan officer. I know I could do well, but it wouldn't be good enough for my clients, giving them not only my best, but making sure they got the best. Okay, maybe 1 in a 1,000 could handle this... but I would love to test them on their jobs...  and yes, I responded to Lana, but she never came back to debate more or to answer my questions.

 

ERICA.... .  wow, that is really said and scary. What ever happened to the code of ethics per se?  Or doing the best for your client and not what's easiest for you, the realtor.  These are the kind of realtors that we need to report. I know some realtors would disagree with me... but I want to hear their side.. I am waiting for Lenn Harley to write about this. It should be interesting.

SHELDON.... .  that's good to hear. In all honesty, it shouldn't matter what type of loan it is... but that it goes to settlement and that you did the best job for your sellers, to get them the best price. And I would love to be part of that 50%... ;o)

SANDY.... . that was my main point, to get other people's attentions. I think this is very serious and it has hurt some buyers when they found their dream home.  But they decided to sell it to someone else that was not an FHA offer, and even in some cases, got less money. It just makes no sense... and I hear some realtors bash VA loans, because it's 100% financing. Who gives these realtors that right, to make that kind of decision, when they have no idea or clue about the buyers. Yes, some loan officers and or lenders botch settlements or loans.  But that can happen with any loan. Hell, I have closed 2 loans this year that were approved as a conventional loan, yet both didn't close because the other lenders couldn't or didn't know how to.... yes, it happens even on conventional loans.  thanks

 

Jul 16, 2009 01:16 AM #71
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

STEVE.... . I don't know of one realtor personally, but I have heard from several agents in the past, and just recently in my previous blog, that they will say this to their sellers.  It's sad and yes, they should be fired.

STEVE again... . you should know read some of the comments after yours too.  ;o) But yes, FHA loans don't take any longer... and if they did, even in previous years, it was usually due to those loan offices and or lenders that didn't know much about FHA loans.  I took a loan from a lender that took a loan from the first lender... this was about 3 weeks ago.  The first lender had the loan for 2 months and never got it approved... and PS.. the loan officer ordered a conventional appraisal on a FHA loan. Okay, people make mistakes... but from what I heard, this loan officer just had no clue. After I got the loan, I rushed it and stayed on top of it and still got it closed in 9 business days. But yes, here is a great example that FHA loans take longer, just because an idiot loan officer or lender took their time or botched something on their end.

 

WILLIAM aka BILL.... .  they got me... I was told that I wrote that title on purpose to get their attention. Boy, they got me on that one. But wait, I got them too, because yes, that was my main intention. I felt that this was an extremely important issue that needed some exposure.

Let you and I put our feelings aside on FHA loans for a moment. There is message here, within my blog, and we need people & realtors to take this seriously. To think about their actions or what they will say, before they do anything or say anything. And yes, look at Renee's chart... I would have to assume that this is happening in most areas around the country. Overall, yes, we need to slap people upside the face, if that is the only way to grab their attention.  And even that doesn't work in many cases.  Thanks for your support on this one, on my methods... thanks

 

Jul 16, 2009 01:27 AM #72
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Missy Caulk
Missy Caulk TEAM - Ann Arbor, MI
Realtor - Ann Arbor Real Estate

Thanks Jeff.

Jul 16, 2009 05:48 AM #73
Rainer
47,971
Dianne Hicks
HomeSmart Real Estate - Temecula, CA

HI Jeff!

You are so right! I had an FHA that closed in 23 days and a conventional that closed in about 60 days and that was after pushing them hard with 10 times the amount of phone calls. The conventional was so much more work I cannot even begin to tell you. I think the bigger difference is not how they financed but who the lender is!!!

Aug 12, 2009 09:24 AM #74
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